General Motors will sell its Opel unit and other European assets to Canada’s Magna International Inc in a deal German Chancellor Angela Merkel said today would protect the assets from GM’s likely bankruptcy.
The German government, GM and Magna International agreed early today to a plan for the Canadian auto parts maker to acquire Opel with €1.5bn in bridge loans from Germany, while contributing €300m to keep Opel running in the short term, Finance Minister Peer Steinbrueck told reporters.
“Opel has been given prospects for the future,” Mrs Merkel told reporters hours after overnight talks between representatives from the two companies and government officials. “Now the work for Opel and for Magna ... really begins.”
Under the deal, Magna will take a 20% stake in Opel and Russian-owned Sberbank will take a 35% stake, giving their consortium a majority. GM will retain 35%, and the remaining 10% will go to Opel employees.
The consortium plans to work with Russian car maker Gaz to produce more than a million vehicles in Russia and Eastern Europe. Sberbank’s chairman, German Gref, praised the deal in an interview broadcast today on Russia’s state-run Vesti TV.
“We think that this is a very good chance for Russia to receive at an unprecedentedly low price one of the most progressive – from a technological standpoint – European automakers,” Mr Gref said.
The deal calls for Opel to be put under the care of a trustee later today, designed to shield it from GM’s likely filing for bankruptcy protection next week.
Other GM Europe assets, including British brand Vauxhall and its plants, were consolidated under the Adam Opel GmbH earlier in the week and will also enter the trusteeship. Sweden’s Saab is not included in the deal.
Opel and Vauxhall have operations in Belgium, Spain and Poland among other countries.
The government had stressed the need for a trustee to ensure taxpayer assistance does not flow to GM stakeholders in the US.
“The fault here is ... a major mismanagement in the US of America by GM,” Mrs Merkel said today.
She said she spoke with President Barack Obama by telephone yesterday as the deal with Magna was being negotiated.
Magna’s co-CEO Siegfried Wolf said he expected the agreements with GM to be signed in five weeks’ time, but insisted the deal struck today would prevent Opel from being touched by whatever happens to GM.
Parliamentary committees in two states, Hesse and North Rhine-Westphalia, must still approve the financing. That is expected tomorrow.
Germany Economy Minister Karl-Theodor zu Guttenberg said he thought the plan was risky enough that an “orderly insolvency” could still be the best bet to save Opel.
“I have a different risk assessment than my colleagues participating in the Opel negotiations,” Mr Guttenberg said in a statement. “Certainly an insolvency would also not currently be without risks.”
As part of the deal, all four factories in Germany would stay open though Magna, based in Aurora, Ontario, has said previously it would need to shed some 2,600 jobs.
Opel employs 25,000 people in Germany, nearly half of GM Europe’s work force.
German government officials, speaking anonymously because the particulars of the plan have not been announced, said Magna’s plan envisioned between 7,500 and 8,500 job cuts across Europe.